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date: 05 March 2021

Abstract and Keywords

This article starts with a summary of the microfinance movement, its growth and outreach. In addition, it outlines the various microfinance lending models and institutional designs. Next it discusses microfinance for entrepreneurs in detail, including a discussion of the challenges in measuring the impact of microfinance. Microfinance supporters often claim that it provides a way out of poverty by allowing individuals to take advantage of profitable business opportunities. This is, however, largely based on anecdotal evidence. Rigorously measuring the impact of microfinance is complicated by self-selection into microfinance and the lack of an appropriate control group.

Keywords: microfinance movement, entrepreneurial finance, institutional designs, profitable business, poverty, control group

Miriam Bruhn

Miriam Bruhn is an economist on the Finance and Private Sector Development Team of the Development Research Group at the World Bank. She holds a PhD in economics from MIT and a BA in economics from Yale University. Her research interests include the effect of regulatory reform on entrepreneurial activity, the informal sector, financial literacy, constraints to micro and small enterprise growth, and the relationship between institutions and economic development.

Fenella Carpena

Fenella Carpena is a graduate student in the Department of Economics at the University of California, Berkeley. Prior to graduate school, she was a consultant at the World Bank's Development Research Group and a research associate at the Harvard Business School.

Bilal Zia

Bilal Zia is an economist in the Finance Team of the Development Research Group at the World Bank. He joined in July 2006 after completing his PhD in Economics from the Massachusetts Institute of Technology. His research is focused on firms, banks, and access to finance. In recent work, he has studied financial constraints and the allocation of credit subsidies using unique loan-level data from Pakistan; the impact of financial shocks on banks and bank lending; and the effects of financial shocks on industrial composition and corporate groups. He is also involved in studying household level banking services using randomized control trials and household surveys in Indonesia. He holds an MCP and a PhD in Economics from the Massachusetts Institute of Technology, and a BSc (Hons) from the London School of Economics.

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